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Focus: Sourcing/Procurement

Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

March 28, 2012

 
Supply Chain News: What is the Future for Outsourced Procurement?

 

Hackett Group Survey Shows Modest Increase Expected for Outsoucing - but More Aggressive Plans for Offshoring

 

SDigest Editorial Staff 

 

Not long ago, the notion of "procurement process outsourcing" seemed to be quite the rage, with a large number of service organizations offering outsourced management of the procurement function.

That might have led many procurement professional to be worried about their employement futures, though we will note such moves almost always involved indirect procurement areas, not direct goods and materials.

So where do we stand today?

A recent research effort by the consultants at the Hackett Group shows a sort of mixed bag: not a whole lot of real procurement outsourcing yet, but more aggressive plans for the future by many companies.

The chart below shows the result from a Hackett survey question relativeto a company's current level of outsourcing today, as well as plans for the next 2-3 years.

 

Current Levels and Future Plans for Procurement Process Outsourcing

 

Source: Key Issues Study -  The Hackett Group, 2012

 

As can be seen, 60% of companies say they still manage internally 90% or more of procurement activity, and another 23% say they manage 60-90% currently. Very few have even a 50-50 split between insourced and outsourced management.

However, the expectations are that this will change a bit over the next 2-3 years. The percentage predicitng their level of inhouse management will remain at 90% or more drops from 60% to 48%, with most expecting moderate change, as the 60-90% inhouse number goes up from 23% to 31%, accounting for most of the 90%+ delta.

 

(Sourcing and Procurement Article Continues Below)

CATEGORY SPONSOR: SOFTEON

 


Another side of a somewhat similar coin is whether procurement activities will be moved from the US/headquarters area to offshore, either because the costs are lower for more commodity like procurement functions, or because those low cost areas are where the procurement action is. IBM, for example, moved its chief procurement officer's base location to Hong Kong several years ago because that is where its suppliers are.

As this chart from the survey shows, procurement leaders expect a sizable shift to offshore employees, with predictions for a 56% increase to 25% of total headcount by 2013.

 

Levels of Offshore Procurement Headcount

 

Source: Key Issues Study -  The Hackett Group, 2012

 

Put together, the two results show there could be significant changes in many procurement organizations due to outsourcing and offshoring - just as there is in virtually every other area of the supply chain.

What's your take on this Hackett Group data? Does it match your expectations or not? Let us know your thoughts at the Feedback button below.

 

Send Feedback


Recent Feedback

True. This is in-line (well almost) with our reading of the Market as well.

The above numbers tend to be realistic in the Indirect Commodities area and we are not seeing any traction in Direct Commodities.


Suresh
Lead Capgemini Procurement Services
Capgemini
Nov, 02 2012
 
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